CNHDEFI: Cosmos Network Hub

CNHDEFI: Cosmos Network Hub

Note: May become a sub-pool in ALTL1POOL

CNHDEFI Components & Weightings
CNHDEFI Components & Weightings

The Cosmos ecosystem is made of multiple blockchains built inherently on the cosmos SDK — something that is largely overlooked. Projects like Terra, Thorchain, Ankr Protocol, Band protocol, and much more are application blockchains built on it today. Cosmos secures over $167.99 Billion in digital assets at the time of writing this article.

Overview of Cosmos Network IBC Ecosystem

Cosmos Background Research

IWASM EVM Cosmos Hub Gravity Bridge

Near term, one thing to watch for will be the impact on DeFi investing of interchain bridges/hubs. In the past, tokens (finally) achieving listings on CEXes usually enjoyed large jumps in price as they became exposed to a broader range of buyers, the so-called ‘CoinBase effect’. Now that Ethereum-based L1/L2 DEXes account for so much trading and pooled liquidity, exposing Ethereum L1/L2 DEX liquidity to promising start-ups native to other L1 chains should produce some reliable near-term ‘wall of money’ surges in their token prices. This is likely to happen beginning in Q3 2021, most broadly throughout the Cosmos Network IBC ecosystem. Given the complexities of multiple wallets for average investors, there will be a recurring opportunity to front-run bridges by pre-packaging alt-chain pools for launch as ERC 20 pooled tokens just before the bridges go live.

Cosmos Network - IBC, Cosmos Hub, Gravity Bridge & DEX

Cosmos Network offers a different vision for an inter-chain future: one built around interoperability as a first principle. Cosmos believes that giving sovereign L1 chains a shared communication standard is a natural step in the evolution of protocol design. Inter-Blockchain Communication (IBC) is the internet of blockchains, and Cosmos is the only one building and actually shipping the technology. Beyond interchain trading of Cosmos tokens, work is already being carried out to connect major IBC-compatible chains like Polkadot and Celo to the Cosmos Hub through IBC. The most advanced non-IBC work is on the Gravity Bridge to Ethereum, which is planned to be proposed as an upgrade to the Cosmos Hub in Q2.

Gravity Bridge will be the most secure, efficient, and decentralized cross-chain bridge to Ethereum, and will allow for its substantial value and liquidity to flow into the Cosmos Hub, enriching the Gravity DEX marketplace. As a two-way bridge, just as native ERC-20 tokens can cross into the Cosmos, Cosmos/IBC-compatible assets can also flow to Ethereum as ERC-20 tokens as well, allowing the Ethereum community to buy Cosmos tokens on DEXs like Uniswap.

The Cosmos-based Gravity DEX uses a different model than Uniswap, called the Equivalent Swap Price Model (ESPM) that removes inefficient price discovery by landing on exactly the latest swap price. This makes it fairer all around and ensures that the price you see is the price you get. Gravity DEX has orderbook capability and further improves on Uniswap’s model by using batch execution to remove the possibility of MEV front-running or price manipulation.

Since the Gravity Bridge can perform cheaper ERC-20 sends and batched transactions, it slashes Ethereum gas fees, causing more users to access Ethereum DeFi via the Cosmos Hub and Gravity Bridge. The more users, the lower the gas costs through execution context sharing. This opens up a wealth of Ethereum arbitrage opportunities, accessible only via the Cosmos Hub. As more users access the Hub to take advantage of these opportunities, this, in turn, enhances Cosmos native DeFi and volume on Gravity DEX.

Once bridged to Etherium, the ATOM-based Gravity DEX will provide a major boost to all these currently hard-to-buy tokens, allowing anyone with any IBC tokens to easily swap them to get in on the ground floor in a decentralized permissionless way.